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Dangdang, a top Chinese e-retailer, receives a new buyout plan

May 31, 2016 05:42 PM

(Bloomberg)—Chinese e-retailer Dangdang Inc. rose for the first time in five days as a new offer by management to take the company private, while lower than an initial proposal, eased concern that regulators will scuttle the deal.

Dangdang’s American depositary receipts advanced 3.9% to $5.55 at the close in New York on Tuesday after the company’s chairman, Peggy Yu Yu, and CEO Guoqing Li said they will pay $6.50 in cash per ADR, according to a statement. That’s 17% lower than the management group’s original offer in July and 26% below a competing bid made by iMeigu Capital Management in March.

Dangdang.com is No. 9 in the Internet Retailer 2016 China 500.

The revised offer comes as China is scrutinizing the impact that a large number of overseas-traded companies could have on the market if they were to move to onshore exchanges. More than 40 in the U.S. have announced such plans since 2015. The China Securities Regulatory Commission is concerned that a speculative frenzy was building for the shares of the local companies considered potential vehicles for so-called reverse mergers, an easy route for overseas-listed firms to debut in Shanghai or Shenzhen.

Worried investors

“Given all these rumors, the markets are really worried about whether these deals are even going to happen,” Ryan Roberts, a Hong Kong-based analyst at MCM Partners, said in a phone interview. Now, the reduced bid for Dangdang is giving investors “a bit of confidence.”

This is the third bid that Dangdang, once considered China’s answer to Amazon.com Inc., has received in less than a year. iMeigu, a Beijing-based hedge fund, made an offer in March, saying the original buyout from the management was too low. The firm declined to comment on Dangdang’s new offer.

Dangdang’s shares had slumped 21% over the past ten days to close at $5.34 on Monday, 18% below the latest deal price.

“Our decision to revise the offer price has been a difficult one to make but is necessitated by the tougher than expected market conditions facing the company and the global economy,” Dangdang’s Yu and Li said in the statement, citing competition in China’s e-commerce industry and volatility in global financial markets.